Circular on Compliance with Fair and Transparent Customer Dealing Instructions in Credit Facility Contracts

In the name of Allah, the Most Gracious, the Most Merciful

[Central Bank of Jordan Logo]

Number: 1 / 27 / 9889 Date: 16 / 11 / 1439 AH Corresponding to: 29 / 7 / 2018 AD

Circular to all banks operating in the Kingdom

Greetings,

A study of a sample of credit facility contracts signed with your customers, which you provided to us, revealed that a number of these contracts contain provisions that directly or indirectly contradict the provisions of the Instructions for Dealing with Customers Fairly and Transparently No. (56/2012) dated 31/10/2012, its amendments, and subsequent circulars, in terms of:

1. Some banks failing to specify the instrument and/or the term of the instrument adopted for pricing products that include a variable interest rate, and some failing to clarify the added margin (the fixed part of the interest rate/return).
2. A number of contracts including a clause that grants the bank the freedom to amend interest rates, commissions, and margins at any time, and/or failing to specify the frequency of interest rate/return adjustment, and failing to adhere to the fixed part throughout the contract period, thereby violating the provisions of the above instructions and the credit policy of those banks.
3. Non-compliance with the maximum limits for commissions and fees specified in the table annexed to the above instructions, including what some banks' contracts contained regarding charging a monthly late fee of a minimum of (10) JOD.
4. Some banks' contracts not including the mechanism and conditions for early repayment of granted facilities, including linking the early repayment fee to the remaining period until the last installment is due, according to the table of maximum limits for commissions and fees attached to the above instructions.
5. Most bank contracts including terms and expressions that carry the nature of commissions and fees under other names without stating their nature or definition, and the borrower pre-signing their validity and commitment to pay them, examples of which are (customer commission, expenses, attachments, wages).

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6. A number of contracts including unclear texts that may allow for more than one interpretation, with the customer signing a waiver of their right to object to them, examples of which are (as the bank deems appropriate, the appropriate price and method, appearance of differences, unintentional error in calculation, addition of expenses).
7. Some of the contracts provided to us are printed in a small, unreadable font.
8. A number of banks including a clause in their contracts stating the borrower's and/or guarantor's agreement to authorize the bank to unspecified parties in the contract to collect outstanding and unpaid debts, without specifying the nature of these parties, whereas the collection of outstanding debts should be through the bank itself or any of its lawyers.
9. Non-adherence to the contract's stipulation to notify the customer and/or guarantor where necessary according to the effective instructions; instead, customers in some banks signed phrases indicating the customer's/guarantor's waiver of this, examples of which are (without the need for notification).

Accordingly, we emphasize full compliance with the provisions of the Instructions for Dealing with Customers Fairly and Transparently No. (56/2012) dated 31/10/2012, its amendments, and subsequent circulars, and not to include any provisions in contracts that contradict the effective instructions. This requires banks with such observations to rectify their situation for all credit product contracts by no later than 1/9/2018, to avoid the imposition of any penalties stipulated under Central Bank Law No. (23) of 1971 and its amendments and/or Banks Law No. (28) of 2000 and its amendments.

Please accept our respect,

The Governor Dr. Ziad Fariz

Form (1/1/09)